Crude oil logs gains on the back of falling US drilling activity

Crude oil logs gains on the back of falling US drilling activity(Reuters)

Crude oil futures traded lower on 12 June amid concerns surrounding the global oil glut, but finished higher for the week on the back of declining US drilling activity.

Brent July contract finished $1.24, or 1.9%, lower at $63.87 a barrel on 12 June.

Prices rose some 0.8% for the week as a whole.

US July contract finished 81 cents, or 1.3%, lower at $59.96 a barrel on Friday.

Prices rose some 1.4% on the week.

Naeem Aslam, chief market analyst at AvaTrade, told MarketWatch: "Traders were excited to see that the US drilling activity has slowed down further, but this optimism was cooled" by the fact that oil cartel Opec is "pumping more oil and this is pulling the price of oil lower".

Meanwhile, Baker Hughes reported that the number of US rigs actively drilling for oil dropped for a 27th successive week. Active oil drilling rigs fell by 7 to 635 rigs as of 12 June.

Saudis to pump more

Saudi Arabia is prepared to raise its oil output in the coming months to a new record to meet a rise in global demand, despite increased domestic use, a senior state oil company official said on 11 June.

Capital Economics said in a 10 June note to clients: "US crude oil stocks fell sharply last week, registering the largest weekly decline since July last year. This was in contrast to the previous three weeks of data which had suggested the pace of the stock drawdown was easing."

Capital Economics said in a separate note: "[May's] small increase in supply from OPEC just adds to the glut of oil already in the market and underlines the cartel's commitment not to cut output just to support prices in the short term."